Zeros, Near Zeros and Gravity with Endogenous Market Structures : The Case of Maple Syrup Exports

Présentation de Bruno Larue (Université Laval, Canada)

Bruno Larue est professeur au département d'économie agroalimentaire et des sciences de la consommation de l'Université Laval.

Abstract: Some commodities are produced in a few countries and traded by a few firms and trade models based on monopolistic competition are not suitable for these commodities. We argue that maple syrup can be modeled as a Canada- US duopoly. Because trade costs have non-monotone effects on export values when duopolists have Bertrand conjectures and negative effects under Cournot conjectures, an inference about the mode of competition can be made from an empirical trade model with quadratic terms. In "near-zero" markets too small to support a duopoly, but large enough to support a monopolist, duopolists play either mixed or correlated strategies according to a theory of endogenous market structure. The two types of equilibria yield different theoretical patterns for the probabilities of a duopoly, Canadian and US monopolies and no trade. A new gravity framework is developed that endogenizes market structure and estimate gravity models for each market structure. Distance parameters are consistent with Cournot conjectures and the patterns of market structure probabilities are consistent with mixed-strategy equilibria.